A recent article talked about net worth – what it is and how the writer calculated his own, how it can be used to track financial progress, including toward retirement, etc.
I wrote the following comment which several blog readers did not like.
Or, you could link all your accounts, assets, debt in a tool such as Fidelity net worth calculator and everything except major changes such as selling a property is auto updated daily for you. All you have to do is lower debt balances.
I agree it’s an interesting number to know, but how necessary I’m not sure unless one is concerned about state and federal estate or inheritance taxes. Having it updated could be a big help for anyone settling an estate.
Using net worth as a guide to how well one is doing toward retirement may provide a false sense of security unless selling some major assets is part of the retirement plan. A third of my net worth is in two homes neither of which I view as a usable investment.
If you look at average and median net worth by age, you will see that older Americans have the highest average net worth. For example, the highest average and median net worth is the 65-74 age group – $266,400 and $1,217,700. While seniors have the highest net worth, 65 and older Americans have the lowest median household income.
Don’t confuse net worth with retirement savings and investments. You can’t live off your house – unless you sell it or take some form of loan against the equity – which lowers your net worth.
Is net worth important?
Net worth is one way to check your financial pulse and spot strengths and weaknesses. However, it isn’t a perfect picture. Just because someone has a high net worth doesn’t mean they have a high standard of living. For example, a person’s home may pad their net worth figure, but they can still be cash poor if they don’t plan to sell it and have no savings.
Curiosity about others’ net worth can motivate us to set and pursue financial goals. It can also make us feel unnecessarily inferior. It’s important to remember that net worth isn’t a fixed number. It can change — positively or negatively — with time.Nerd Wallet